Originally created 12/13/01

Tax returns: Beating the deadline



Sure, it's already mid-December, but not everyone's 2001 tax fate is sealed.

Certain financial moves made before Dec. 31 can ease this year's tax burden - though there may be less reason for concern.

"Last year a lot of mutual funds were distributing capital gains, and people had to offset those gains by moving other assets," local CPA Gene McManus said. "... Everything was down this year, so we don't have to worry about that."

Below is a list of ideas for people who want to give their tax statements one final tweak:

  • Retirement funds: Immediate tax advantages can be garnered by contributing to tax-deferred retirement accounts, such as IRAs and 401(k)s.
  • "Max out your contributions - that's a no-brainer," Mr. McManus said. "The tax is deferred on every dollar you put in. It's the simplest way to save on taxes and a smart way to plan for the future."

  • Donate appreciated property: If you are thinking about donating to a charity this holiday season, you may consider giving stocks that have appreciated in value instead of cash.
  • "We recommend that to everyone," said John Gillion, a a senior partner at Baird & Co. in Augusta. "Particularly to people who were considering giving cash."

    Say you want to donate $2,000 to a charity. You have the cash, but you also have some stock that has appreciated from $10 a share to $100 a share. Donate 20 shares - $2,000 - then use your cash to buy 20 shares of the same stock. Now your basis in the stock is $100 a share, instead of $10 a share, and that will ease the capital gains tax incurred when you eventually sell it.

    Donating the stock itself also allows you to deduct its current market value.

  • Accelerate deductions: For those with enough deductions to itemize, it's a good idea to "bunch" your deductible expenses in the same year. It's best not to have expenses you can itemize in a year in which you're going to take the standard deduction anyway.
  • If your expenses are more than 2 percent of your adjusted gross income, you are eligible to itemize deductions, including employee business expenses, tax preparation fees and investment publications, among others.

  • Pay higher-education tuition now: One way to accelerate deductions into this year is through the Hope Education Credit. Parents can earn a $1,500-per-child tax credit if they pay at least $2,000 in academic fees per year for the first two years a child is eligible for college.
  • They also can claim $1,000 per tax return through the Lifetime Learning Credit, which is for anyone attending higher-education classes.

  • Review investments: If you are in danger of heavy taxes because of capital gains on a few investments, you may want to sell other assets that have capital losses and claim the loss to cancel out taxes on your capital gains.
  • "The problem this year is there's not many people who have capital gains, unless they've had the stocks a long time," Mr. McManus said.

    Reach John Bankston at (706) 823-3352 or john.banks@augustachronicle.com.